FTSE All-Share

The FTSE All-Share is a highly regarded Stock Market Index that acts as a broad snapshot of the UK's corporate health. Think of it as the most comprehensive guest list for the UK stock market party. Maintained by the FTSE Group (a subsidiary of the London Stock Exchange Group), this index includes over 600 companies listed on the London Stock Exchange, representing a whopping 98% of the UK's total Market Capitalization. Because it covers such a vast portion of the market, it's widely used as a Benchmark for UK-focused investment funds. If a fund manager claims to be a genius at picking UK stocks, their performance is often measured against the FTSE All-Share. If they can't beat it, you might wonder what you're paying them for!

Despite its name, the “All-Share” doesn't actually include every single company listed in London. It focuses on those that meet specific size and liquidity criteria, ensuring the companies included are readily tradable. The index is essentially a combination of three other major UK indices:

• The FTSE 100: This is the headliner, comprising the 100 largest eligible companies by market capitalization. These are the giants of British industry and global players like Shell, AstraZeneca, and HSBC.
• The FTSE 250: This includes the next 250 largest companies after the FTSE 100. These mid-cap companies are often more domestically focused than the blue-chips in the FTSE 100 and can be a better indicator of the UK economy's health.
• The FTSE SmallCap: This index is made up of several hundred smaller companies that are still large enough to qualify for the All-Share but sit outside the top 350.

Together, these three tiers provide a layered and comprehensive view of the entire investable UK market, from the corporate titans down to the smaller, potentially faster-growing firms.

For a follower of Value Investing, the FTSE All-Share is a double-edged sword. On one hand, it's an indispensable tool. On the other, it represents the very thing a value investor tries to beat: the market average.

The index provides a crucial reality check. The ultimate goal of stock picking is to outperform the market over the long run. The Total Return of the FTSE All-Share (which includes reinvested Dividends) is the score to beat. If your hand-picked portfolio of UK stocks consistently lags behind the All-Share, it's a strong signal that your strategy needs a rethink. It might even suggest that a low-cost Passive Investing strategy would serve you better. It also provides a fantastic hunting ground; within those 600+ companies lie potential hidden gems waiting to be discovered by a diligent investor.

Buying the entire index (via a tracker fund) is the opposite of a focused value strategy. A value investor's job is to buy wonderful companies at fair prices, or fair companies at wonderful prices. An index, by its nature, forces you to buy everything—the overvalued darlings, the fairly priced workhorses, and the struggling laggards—all at their current market price. Because the index is market-cap weighted, you are systematically buying more of the largest, most popular, and potentially most overvalued companies. A true value investor would rather sift through the components of the All-Share to find individual bargains than buy the entire basket.

For those who believe in the long-term growth of the UK market and prefer a simple, diversified approach, investing in the FTSE All-Share is straightforward. You don't buy the index directly, but rather a financial product that mimics its performance. The two most common ways are:

• Index Fund: This is a type of mutual fund that holds all (or a representative sample of) the stocks in the index. You buy into the fund, and the manager handles the rest. It's a classic “set it and forget it” approach to achieving broad Diversification.
• Exchange-Traded Fund (ETF): An ETF tracking the FTSE All-Share is similar to an index fund but trades on a stock exchange just like an individual share. ETFs often have lower management fees than traditional funds and can be bought and sold throughout the trading day.

Both options offer an incredibly low-cost way to own a piece of the entire UK stock market, making them a cornerstone for many investors' portfolios, whether they practice Active Management or simply want to capture the market's return.